Will the Obama Administration Stop Comcast From Buying Time Warner?

The cable giants will try to muscle a $45 billion deal past regulators.

Comcast service truck outside of a Comcast Payment and Technical Facility December 5, 2005 in Mount Prospect, Illinois.
National Journal
Laura Ryan and Brendan Sasso
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Laura Ryan Brendan Sasso
Feb. 13, 2014, 5:16 a.m.

Com­cast agreed to buy Time Warner Cable for $45.2 bil­lion on Thursday in a deal that would com­bine the na­tion’s two largest cable pro­viders.

The com­pan­ies say they ex­pect to close the mer­ger by the end of the year, but they first will have to sur­vive what is sure to be a bru­tal reg­u­lat­ory re­view, and op­pon­ents are already press­ing the Obama ad­min­is­tra­tion to block it en­tirely.

The Justice De­part­ment’s An­ti­trust Di­vi­sion will ex­am­ine wheth­er the mer­ger would in­ap­pro­pri­ately lim­it com­pet­i­tion, while the Fed­er­al Com­mu­nic­a­tions Com­mis­sion has a broad man­date to block any deals that aren’t in the pub­lic in­terest.

An­ti­cip­at­ing reg­u­lat­ory hurdles, Com­cast already an­nounced it is pre­pared to sell off Time Warner’s sys­tems in areas cov­er­ing 3 mil­lion of its 11 mil­lion sub­scribers. But the com­bined com­pany will still have about 30 mil­lion cus­tom­ers — rep­res­ent­ing about 30 per­cent of the en­tire in­dustry and mak­ing it by far the largest pro­vider.

Con­sumer-ad­vocacy groups are already or­gan­iz­ing their cam­paign to try to kill the deal.

“Com­cast can­not be al­lowed to pur­chase Time Warner Cable. An­ti­trust au­thor­it­ies and the FCC must stop it,” John Bergmay­er, seni­or staff at­tor­ney for Pub­lic Know­ledge, said in a state­ment.

He claimed that Com­cast, which already owns Uni­ver­sal and NBC, would be­come a “bully in the school­yard,” able to dic­tate terms to oth­er com­pan­ies and hike prices on con­sumers.

“TV view­ers, In­ter­net users, and every­one who de­pends on a well-func­tion­ing com­mu­nic­a­tions mar­ket­place would not be­ne­fit from an even more power­ful Com­cast,” Bergmay­er said.

Free Press Pres­id­ent Craig Aaron said a mer­ger of the two gi­ant com­pan­ies should be “un­think­able.”

“This deal would be a dis­aster for con­sumers and must be stopped,” he said.

The FCC and the Justice De­part­ment de­clined to com­ment on the deal Thursday. But Ajit Pai, a Re­pub­lic­an FCC com­mis­sion­er, pre­dicted in Decem­ber that a Com­cast-Time Warner mer­ger would face reg­u­lat­ory op­pos­i­tion. 

“The Obama ad­min­is­tra­tion has ap­plied great­er scru­tiny to pro­posed mer­gers and ac­quis­i­tions,” Pai told The Wall Street Journ­al.

“Pre­ced­ents like this sug­gest an out­right ac­quis­i­tion by Com­cast of Time Warner Cable could face a num­ber of hurdles in the Obama ad­min­is­tra­tion.”

The sur­prise an­nounce­ment brings Charter Com­mu­nic­a­tion’s eight-month-long court­ship of Time Warner Cable to an end. Time Warner Cable re­buffed Charter’s of­fer val­ued at $133 per share last month, say­ing it was “grossly in­ad­equate.”

Com­cast will pay $159 per share to Time Warner Cable’s share­hold­ers in an all-stock agree­ment. The mer­ger will add key metro areas such as New York City and Los Angeles to Com­cast’s already large port­fo­lio.

The two com­pan­ies ar­gue that their mer­ger would not harm com­pet­i­tion be­cause there is no over­lap between their sys­tems.

“We do be­lieve this trans­ac­tion will bring real pro-con­sumer be­ne­fits. It’s pro-com­pet­it­ive, strongly in the pub­lic in­terest, and we be­lieve ap­prov­able,” Com­cast CEO Bri­an Roberts said on a con­fer­ence call with re­port­ers.

He also sug­ges­ted that Com­cast is pre­pared to ac­cept an ar­ray of con­di­tions on the deal. To buy NBC-Uni­ver­sal three years ago, Com­cast agreed to abide by the FCC’s net-neut­ral­ity rules, which re­quire In­ter­net pro­viders to treat all web­sites equally.

The D.C. Cir­cuit Court of Ap­peals struck down the rules last month, but be­cause of Com­cast’s agree­ment, the com­pany is bound to fol­low the rules un­til Janu­ary 2018. Roberts said Com­cast would ex­tend that re­quire­ment to Time Warner if the mer­ger is ap­proved.

The FCC could use the deal as an op­por­tun­ity to ex­pand the net-neut­ral­ity re­quire­ments on the na­tion’s largest cable broad­band pro­vider. The agency could also force Com­cast to ac­cept a host of oth­er agree­ments. For ex­ample, the pro­vider agreed to of­fer a low-cost In­ter­net plan for low-in­come con­sumers, called In­ter­net Es­sen­tials, when it bought NBC-Uni­ver­sal.

Law­makers are likely to take a close look at the deal, and the rel­ev­ant com­mit­tees are ex­pec­ted to hold hear­ings. While Con­gress has no form­al power to block the mer­ger, law­makers can put pres­sure on the reg­u­lat­ory agen­cies. 

But Com­cast has deep ties to the Obama ad­min­is­tra­tion that may prove use­ful. Dav­id Co­hen, who over­sees Com­cast’s lob­by­ing team, was one of Obama’s top bund­lers and held a fun­draiser for him at his home in Phil­adelphia in 2011. At the event, Obama thanked Co­hen and his wife for be­ing “such great friends for so many years.”

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